Lower costs, less risk, and maximum flexibility.
That’s what every tech startup founder wants to achieve their ambitious goals.
But the budget always remains a concern, as growing projects can present high extra costs. This type of business costs are called variable costs—they change as the project grows.
Keeping variable costs down is something that many tech startup managers want to achieve, and they often turn to remote teams as a solution. In this article, we will explain how remote teams can help reduce spending while contributing to company growth.
What Is a Cost Structure?
Cost structure involves the costs and expenses related to operating a business. It comprises all expenses from utility bills to the cost of developing a tech product.
Fixed and variable costs are two kinds of cost structures. Fixed costs stay the same regardless of how many hours employees work or how many products it makes. For example, these are the costs of hiring an accountant or paying a programmer.
But variable costs are different...
What Are Variable Costs?
Variable costs change with production output. Variable costs examples include marketing expenses, direct labor costs, product development costs, research, travel costs, and more. They are much more diverse compared to fixed costs and can expand along with the project scope.
That’s why many business owners are often concerned about keeping variable costs at a budget-friendly level. These concerns are completely justified, especially in complex software projects where major resources are needed to make a product.
That’s why business owners often choose special pricing systems to keep variable costs down and their companies thriving.
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Remote Teams: A Way to Reduce Variable Costs
One way to keep variable costs down is to hire remote teams. A remote team is a group of individuals working from a different location and communicate with the business via text and video chat.
The remote team arrangement has many advantages for companies that result in lower business expenses.
A tech startup can save money because there’s no need to rent an extra office space. Since remote teams work from different locations, the company won’t face thousands of dollars by avoiding office expansion.
Then there are lower overhead costs, too. Parking, utilities, security systems, equipment, and many other things contribute to business costs.
And there’s the biggest cost driver: employee salaries. A tech startup can hire remote teams on-demand, so there are no long-term salary requirements. Remote workers are paid only for the project they participate in and according to the project time log.
If we add all of these avoided expenses, we can significantly reduce variable costs for companies. That’s why hiring teams on demand is something that many companies practice, especially in the software development industry.
Besides monetary benefits, we should also mention other advantages related to remote teams. As numerous studies suggested, remote workers are more productive than office-based employees because they have lower stress and distraction levels.
Some sources claim that companies can save up to $11,000 annually per employee thanks to reduced costs associated with remote working.
Source: Dollarsprout
Another major advantage is access to an international talent pool. For an early-stage technology startup, finding talent on the local market can be extremely hard, so many companies turn to remote teams as a way to find highly skilled employees in other regions and countries.
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The Benefits of Variable Cost Structures for Technology Startups: Summary
Variable costs vary with production output, so they can increase depending on the project's complexity. For early-stage tech startups, the increase might present huge risks, as project costs could skyrocket and require more investment than originally intended.
Using remote teams is a good method to reduce variable costs. A company’s management will have greater control over spending because remote teams can be hired on-demand. Besides, this work arrangement eliminates or reduces numerous other business costs, including office rent, parking, insurance, and long-term salary requirements.